Demonstrators during a 'Claim the Climate' march in Brussels, ahead of the COP24 climate change conference, COP24 being held in Poland. Photo credit: ASSOCIATED PRESS

When it started becoming as cheap, and then cheaper, to build wind or solar farms than fossil fuel power, the renewable energy plants still faced the barrier of being in competition with coal plants that had already been built. Invariably, these were cheaper.

As global climate talks get under way in Poland, one of the world’s most coal-dependent economies, the report’s conclusions not only challenge the need for governments to build new coal generation but also suggest that it would be more economical to shut existing plants than keep them running, as well as helping nations meet their targets under the Paris Agreement on climate change.

The UN’s Intergovernmental Panel on Climate Change says at least 59% of coal power worldwide must be retired by 2030 to limit global warming to 1.5°C and many countries, including the UK, Canada, France and Mexico have already set phase-out dates. However, many of the biggest producers, including Australia, Germany, Poland, Russia and China remain a long way from any such move, in part because of the number of people employed in the industry.

Carbon Tracker has analysed the profitability of 6,685 coal plants around the world, representing 95% (1,900GW) of all operating capacity and 90% (220GW) of capacity under construction in a two-year research project. In countries like China, with big fossil fuel power industries but inadequate information about plant activity, the group used satellite images and advanced machine learning to estimate the activity of each plant, a technique found to be more than 90% accurate when trialled against known data in the US and EU. It will update the portal where the results are collated, so that investors and policymakers can understand the economics of keeping open or closing coal plants.

Among the key findings of the research are that by 2040, 72% of global coal capacity will be unprofitable due to a combination of high fuel costs and regulations on carbon pricing and air pollution that are in force today. That figure will rise if, as seems likely, more stringent regulations are introduced in future.

The researchers say that China could save $389 billion by closing plants in line with the Paris Climate Agreement instead of pursuing business as usual plans; the EU could save $89 billion; the US could save $78 billion; and Russia could save $20 billion.

Matt Gray, head of power and utilities at Carbon Tracker, said: “The narrative is quickly changing from ‘how much do we invest in new coal capacity?’ to ‘how do we shut down existing capacity in a way that minimises losses?’. This analysis provides a blueprint for policymakers, investors and civil society.”

Utilities and their investors are at risk of being exposed to stranded assets in liberalised markets in many countries in Europe and parts of the US, where there is competition in power generation markets. “Coal plants will be forced to shut unless they can secure government subsidies or a delay or reduction in environmental regulations,” the report says.

However, in regulated markets such as China, Japan, India and parts of the US, coal is sheltered from competition. But if policymakers continue to back coal, they will have to subsidise coal power plants or increase electricity prices for consumers, threatening their economic competitiveness and public finances, Carbon Tracker points out.

Governments should shut the least economic plants first, it adds, and when it is cheaper to build new renewables and gas capacity, they should ban new coal investments – a point that has been reached in India, the US, Europe and parts of Latin America. When it is cheaper to build new renewables and gas than to continue running existing coal plants, they should implement a coal phase out. This appears imminent in Germany the US and other nations, where solar PV and onshore wind have undercut coal in power auctions in 2018.

I write about the intersection of business and the environment and the vital importance of environmental, social and governance (ESG) issues to businesses and the investors that help to fund them. That means anything from climate change to executive pay, as well as disruptiv...